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what happened
stock of meme stocks AMC Entertainment Holdings (asset management company -9.69%), Smile Direct Club (SDC -3.31%)and sundial grower (SNDL -2.69%) They were down today, down 9.5%, 3.6% and 1.9% as of 3:40 p.m. ET.
No news about these memes today. However, potentially bad news for another meme stock appears to be causing the other favorites of the WallStreetBets crowd to sell off.
so what
fellow meme stock Bed bath and others (BBBY -19.63%) Shares in the stock plunged about 23% as of 3:40 p.m. ET after major shareholder Ryan Cohen filed a filing last night.Cohen filed a Form 144 disclosing his Intention to sell 8 million shares and another 1.45 million shares by selling call options bought earlier this year.
Remember, even with today’s drop, Cohen is still sitting on a solid profit. Shares of Bed Bath & Beyond surged about 300% in the first half of August as meme traders appeared to be re-entering the market amid lower inflation and a slumping stock price.
It’s a little odd that a home improvement retailer is conflating with movie theater operator AMC. SmileDirectClub, which sells do-it-yourself dental braces; and Sundial Growers, a Canadian cannabis grower that owns Recently turned to wine as well as. However, these stocks are all part of a group that will gain prominence in 2021. meme stock boomWhen retail traders spot highly shorted companies on online forums such as Reddit’s WallStreetBets, those companies may be squeezed with enough coordinated buying power.
Therefore, these technical factors have resulted in these stocks being grouped together and trading almost as their own industry. Like Bed Bath & Beyond, these three stocks have surged so far this month:
AMC month-to-date total return (daily) data by YCharts
Why would Cohen’s filing alarm these other stocks? Well, Cohen is also chairman of the original meme stock, game station, invested in the run-down gaming retailer with an eye toward transforming the business. Cohen also owns other meme stocks such as Bed Bath & Beyond, as his holdings represent nearly 12% of the home goods retailer’s total shares outstanding.
Seeing a meme stock believer filing to cash in on his stake may have sent a signal to other investors that the price of Bed Bath & and Beyond has become too frothy, even for Cohen. That could be a sign that other meme stocks that are also rising may have gone too far, too fast — though none of those stocks have risen like Bed Bath & and Beyond did earlier this month.
How to do
As the first half of August showed, meme stocks can make exciting moves in the short term. However, as shown today, they can also fall fairly quickly. Where does each stock stand after today’s drop?
AMC appears at risk ahead of special ‘APE’ preferred stock dividend to shareholders, which appears to be an omen Upcoming Dilutive Equity FinancingAt this time, it is unclear how much capital AMC is seeking to raise and at what price APE stock will trade.In addition, cinema peers Movie World Group Its shares plunged more than 50% yesterday after the company admitted it may have to raise a highly dilutive stock raise to fend off bankruptcy amid a disappointing late-summer movie lineup.
Meanwhile, SmileDirectClub could also run into liquidity issues later this year and may have to raise cash after it recently reported disappointing results and a disappointing outlook for 2022. In the first half of this year, SmileDirect burned through $112 million in cash, leaving only $158 million in cash and $790 million in debt.On the plus side, however, the company’s New AI-based phone appProducts that can greatly simplify its customer acquisition costs will be released later this year or early next year.
Sundial is actually the least risky of the bunch, which seems counterintuitive given its status as a small Canadian cannabis grower and retailer. The company reported strong revenue growth last quarter, but much of that came from its acquisition of liquor store retailer Alcanna, which closed in March.
Still, Alcanna is profitable, helping to offset continued losses in the cannabis unit, and Sundial has about $363 million in unrestricted cash and no debt. At the same time, the company has made significant investments in other cannabis companies in the form of debt and convertible debt, either independently or through a joint venture, where it has contributed $480 million.Given that the sundial trades well below its book value And with no debt, it looks pretty cheap — although investors don’t really know what the future of the business will look like. That’s probably why meme stocks have recovered the most after today’s early morning dip.
Billy Duberstein No positions in any of the above stocks. His clients may own shares in the aforementioned companies. The Motley Fool has no positions in any of the stocks listed above.variegated fools have one Disclosure Policy.
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